$2 TRILLION MARGIN CALL FOR EU IS ON ITS WAY

Forget about the winter energy crisis of Europe, we find massive more pain before the same where companies are heading for defaults in their commitment. The global market is going to feel the heat erupting from the European energy company’s crisis. In the last couple of hours, it is being found that there have been significant Key Developments:

• Equinor says $1.5 trillion of margin calls risk energy trading
• Fortum gets 2.3-billion-euro financing, Centrica seeks liquidity
• UniCredit, Intesa earmark billions
• Uniper may need even more funds from Germany
• Hundreds of local utilities in Germany are under strain
• Truss drafts £130 billion plan for households, £40 billion for businesses; it risks running out of control

 The bond market is going to get rattled and margin calls on derivatives will bring nightmares for companies across the globe. Short positions will be built over and a massive sell-off might happen also separate funds will come up to manage the calls.  Till now it’s been found that European energy companies are facing margin calls of a total of $1.5 trillion in the derivatives market. Well, the number does not stop here and it goes a long way. 

Margin calls on the energy derivatives market will spill over to other nations too where the pain in energy companies becomes unbearable.  Rising prices have led to fear of defaults and hence the energy crisis deepens creating massive problems for the EU. This $1.5 trillion will soar to $2 trillion in the next week despite capping since price caps will not help to cut down on demand.

The state government will get funds and would help grant loans to manage these margin calls. The taxpayer’s money will again be deployed to save not only the margins but also jobs in these energy companies.  GDP numbers of the EU will fall like a pack of cards and simultaneously credit rating agencies will be pulling down the ratings which will get reflected in the bonds and equities of these companies. 

The government will bring down energy demand by cutting down on every aspect of the economy creating massive unemployment and job loss. The taxpayer's bill will increase and also government debt will swell to new highs.

Very soon IMF will have to come up to rescue many EU states, particularly the UK. The rise in prices has seen 13% of manufacturers already reduce their hours of operation, and 12% have been forced to make job cuts as a direct result of increased energy bills.  

Furthermore, 42% of manufacturers have seen their electricity bills rise by 100% in the past 12 months, and 32% have also seen their gas bills double. As many as six in 10 British manufacturing businesses are at risk of closure, according to a recent survey. It’s a massive slowdown for them going ahead and will find many business and manufacturing shift to other economies even for short term and might turn out to be long term. Import of items for the EU will increase and hence demand products in other countries will increase which will get inflation control into a messy issue.

On the other hand, the UK is coming up with an $8 billion lithium battery Giga battery factory. Yes, in the world of batteries UK might become the king in the coming days. Well, we all know that every adversary comes up with an opportunity.  

Overseas investment from Taiwan has currently started flowing into the UK and we will find many more nations to come up taking this as an opportunity.  This will create jobs and this shift from the traditional models of energy sources will be a boon but prior to that, we have significant pains to face.